Replies to This Discussion

Permalink Reply by Ann Trieb on September 7, 2010 at 1:53pm

I just closed a deal where the investor was Freddie Mac, and the 2nd was a charged-off Citi loan where we had to pay the attorney collecting the debt much more than 10% of their outstanding balance.

A 10% payoff was approved from the proceeds of the sale, and ON THE HUD there was an additional cash contribution from the seller going to the 2nd. You should be able to push this through closing.

Melissa Colvard-McKinsey said:

In my case, we started by having the buyers pay the deficiency and putting it on the HUD1. The first is refusing to allow more than $3000 to the second and now they want the additional funds going back to the first. The investor is Freddie Mac. Any suggestions?
Thanks!

Permalink Reply by Ann Trieb on September 7, 2010 at 1:55pm

I'm also surprised Freddie was not paying the full 10%. I wonder if GMAC was getting in the way of that transaction.

Darren J. De Wilde said:

I like the idea of POC on the HUD and have been considering this as an idea to get around an issue posed where GMAC is the servicer for FreddieMac. Fred has issued a payoff to the junior of no more than $3000 and has stated that the jnr is not allowed to receive anymore than the allocated 3,000. The jnr, being CitiFinancial have rejected the 3,000 on a 61,000 and change debt. They told me to tell Freddie to go scratch as they would rather see the first lien file Foreclosure than accept the paltry 3,000 on offer from the senior. Anyway since the minimum acceptable by the junior is no less than $6100 or 10%, I rolled up my sleeves and started to call around, eventually getting the buyer to contribute the additional 3100 to appease Citi and close the deal. The problem that concerns me is that GMAC told me it is near impossible to get FreddieMac to allow the jnr anymore than the allocated funds regardless of who raises the funds for the junior lien holder. I was almost given a clue by GMAC when the negotiator told me that the only way in the past that Freddie has approved the junior lien holder getting more is if the buyer contributes and even then, the HUD must read correctly for the approval of the extra funds to be sent to the junior lien holder. I contemplated arranging to secretly send the junior lien holder the additional 3100, but then feared violating RESPA regs and more importantly committing fraud since those funds sent to the junior would technically be done without the consent of the senior. Plus,I was almost certain that one step from total approval, the senior would deliver a document with language requiring all parties to certify that the junior was not receiving funds outside the HUD, hence had I made such arrangement for the junior to accept the 3100 from the buyer prior to the approval, I would indeed have implicated myself into a fraud situation. Plus, in NJ attorneys prepare the HUD and understandably, there is not one who would risk their license to practice. I definitley prefer the Paid Out of Closing statement on the HUD since it is clearly more legal and above board. My question to you is how have you ensured that the additional funds to the junior lien holder go to the right place. ie, would it be something like, Buyer contibution to second lien POC?...thanks for the great idea, its the best possible solution I have seen.

Many thanks for your input and to all on this discussion who have clarified a few grey areas!!!!

Ben Benita said:

to get around this, we have SOMEONE (Seller, Buyer, agent, whomever) send in the $2000 PRIOR to closing, making it refundable if the short sale does not close (MAKE CERTAIN YOU GET THIS IN WRITING).

This way, the stars are in alignment.....nothing happens AT closing, it is done prior thereto.

We have also put items on the HUD as P.O.C (paid outside closing) and they have been approved.....

Ben Benita said:

to get around this, we have SOMEONE (Seller, Buyer, agent, whomever) send in the $2000 PRIOR to closing, making it refundable if the short sale does not close (MAKE CERTAIN YOU GET THIS IN WRITING).

This way, the stars are in alignment.....nothing happens AT closing, it is done prior thereto.

We have also put items on the HUD as P.O.C (paid outside closing) and they have been approved.....

Permalink Reply by Mike Horton on September 16, 2010 at 7:27am

Hold on to your hats folks. The 2nd can have additional funds paid to them in some cases providing the first mortgage approves. If the first mortgage lien holder is contributing to the 2nd and they don't approve the 2nd getting anymore than what they have specified, it is MORTGAGE FRAUD to pay outside of COE. CRIMINAL and not a misdermeanor. WF has been known to allow the buyer or agent(s) to contribute to the second providing they are not being asked to contribute closing costs to the buyer. If the 1st refuses to allow the 2nd any additional funds, you are going to have to renogotiate with the 2nd to reduce the amount they want. Another option is to get the 2nd lien released, so the first does not have a 2nd lien to consider. That would mean a lien release before the first completes it evaluation. Also keep in mind that if everything gets in line and you do get an approval from the first for additional funds and the buyer decides to do a cash contribution at COE if he does not get approval from his lender than he could be committing mortgage fraud. Tread this ground very carefully.

Permalink Reply by Pacita C Dimacali on September 18, 2010 at 5:44am

I have a different experience. I just closed a couple of Wells Fargo short sales, both with 2 loans with Wells Fargo. And in those cases, there were contributions from the seller, buyer and the agents. The 1st allowed them and these contributions were on the HUD.

Most recently on another case, the WF 2nd short sale negotiator is saying that on top of the pay off from the 1st lien holder, WF 2nd will typically request a contribution of 10% of the loan balance, and that this contribution could come from the seller, the buyer, and/or the agents. She told me this before we even knew what the 1st would pay.

Permalink Reply by Michael Schneider on September 18, 2010 at 8:06am

Not my experience with Wells on additional contributions to the 2nd.
This would be investor specific, I think, mine was an FHA 1st. 2nd wanted $4500, also for full satisfaction, FHA consideration was $2,500. Wells was just fine with the additional $2,000 payment, actually encouraged it, just wanted proof that the borrowers had sufficient funds to make the payment.
This is actually more-or-less stated in the FHA guidelines as allowable.

Permalink Reply by John Treadwell on September 20, 2010 at 4:15pm

If you get it in writing from the 2nd that a one time cash payment to them, then as the agent paid the 2000.00 ,and have the seller pay 2000.00 of your commission to you at closing. (or your company) I don't like to do it that way,but this is not the first time in the last months now the 1st wants it all ,and very little to the 2nd. It's becoming more common.

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